Explain miscellaneous expenditures & profit and loss account debit balance

Explain miscellaneous expenditures & profit and loss account debit balance


Miscellaneous Expenditures are the incidental expenses which cannot be classified as manufacturing, selling, and administrative expenses. These expenses are not revenue in nature and hence shown in the asset side of the Balance Sheet and should be written off over a period of time. Example: Preliminary Expenses, Development expenditures and expenditure on raising of shares and debentures.

Profit and Loss Account debit balance : As per the business entity principle, owner is different from the business. Thus, the profit generated by the business belongs to the shareholders, and hence the business is liable to shareholders for the distribution of profits. In the same way, when loss is incurred in the business it is born by the owners. Hence, it is an asset for the business as it is a receivable from the owners.
Explain Ratio Analysis and its advantages.
Ratio analysis is a systematic technique of analysis and interpretation of financial statements…
What are the limitations of Ratio Analysis?
The basic limitation of ratio analysis is that it may be difficult to find a basis for making the comparisons…
What precautions should be taken before using Ratio Analysis as a technique for interpretation of financial statements?
Reliability of the financial statements should be checked first as the ratio analysis is based on financial statements….
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